TORONTO — The Toronto Stock Exchange registered a triple-digit loss Monday, led by the resource sectors, following a major sell-off in the Chinese market and weakness in oil.
The S&P/TSX composite index plunged 184.84 points to close at 14,001.37, while the loonie lost 0.06 of a cent at 76.66 cents US.
The move in Toronto came after the Shanghai share index posted its biggest one-day plunge since February 2007.
Nearly all of the sectors of the TSX closed lower, with the exception of health care. Resources fared especially poorly, with the gold sector losing more than four per cent, while metals and mining lost 3.7 per cent, materials lost 3.1 and energy closed 2.8 per cent lower.
China is a major importer of metals and oil, which are heavily weighted sectors on the TSX.
The September contract for crude oil fell 75 cents to US$47.39, while the August natural gas contract gained 1.3 cents at US$2.789.
Gold — often seen as a safe haven for investors during times of economic turmoil — closed higher, with the August contract gaining US$10.90 to US$1,096.40.
Brian Belski, chief investment strategist at BMO Capital Markets, says the reaction in Canada to the plunge in China demonstrates a broader issue — the degree to which investors around the world are depending on China as a growth engine.
“I think the problem with China is so many investors have put a lot of eggs in that one basket — needing China, really depending on China for growth and China for returns and China for overall appreciation,” said Belski.
However, Belski says investors will need to look elsewhere.
“Going forward, we have to understand that China is going to have some issues with respect to their fundamental growth prospects and how they’re going to manage their economy,” Belski said, adding that in the near future, economic growth is more likely to come from the U.S.
“I think this cycle is going to be all about North American growth — not emerging markets growth, not Chinese growth, not European growth but North American growth,” he said. “And I think a lot of investors are still reluctant to embrace that.”
In New York, the Dow Jones industrial average lost 127.94 points to 17,440.59, while the Nasdaq sank 48.85 points to 5,039.78 and the S&P 500 fell 12.01 points to 2,067.64.
Meanwhile, in U.S. economic news, business investments and shipments data remained soft, while June durable goods order exceeded analyst expectations.
Belski said investors are anticipating that the U.S. Federal Reserve could hike interest rates not once but twice before the year is done.
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Alexandra Posadzki, The Canadian Press
